IEH Corporation

                                    Contents

                        March 26, 2004 and March 28, 2003



<TABLE>
<CAPTION>

                                                                                    Page

                                                                                   Number
                                                                                   ------

<S>                                                                                  <C>
Report of Independent Certified Public Accountant                                    34

Financial Statements:

   Balance Sheets as of March 26, 2004 and March 28, 2003                            35

   Statement of Operations for the twelve months ended March 26, 2004
      and March 28, 2003
                                                                                     37

   Statement of Stockholders' Equity as of March 26, 2004 and March 28, 2003         38


   Statement of Cash Flows for the years ended March 26, 2004 and March 28, 2003     39

Notes to Financial Statements                                                        41
</TABLE>






                                       32
<PAGE>




                Report of Independent Certified Public Accountant
                -------------------------------------------------


Board of Directors
IEH Corporation

We have audited the accompanying balance sheets of IEH Corporation as of March
26, 2004 and March 28, 2003 and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended March 26, 2004 and March 28, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based upon our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEH Corporation as of March 26,
2004 and March 28, 2003 and the results of its operations and its cash flows for
each of the two years ended March 26, 2004 and March 28, 2003 in conformity with
generally accepted accounting principles.








                                                    Jerome Rosenberg, CPA, P.C.

Melville, New York
June 17, 2003



                                       33
<PAGE>














                                 IEH CORPORATION

                                 BALANCE SHEETS
                     As of March 26, 2004 and March 28, 2003

<TABLE>
<CAPTION>
                                                                    March 26,    March 28,
                                                                      2004          2003
                                                                   ----------   ----------

                                     ASSETS

CURRENT ASSETS:
<S>                                                                <C>          <C>
Cash                                                               $    4,480   $    5,565
Accounts receivable, less allowances for doubtful accounts
   of $10,062 at March 26, 2004 and March 28, 2003                    586,491      769,845
Inventories (Note 2)                                                1,014,598    1,089,075
Prepaid expenses and other current assets (Note 3)                     16,616       53,722
                                                                   ----------   ----------

          Total current assets                                      1,622,185    1,918,207
                                                                   ----------   ----------


PROPERTY, PLANT AND EQUIPMENT, less accumulated
   depreciation and amortization of $5,788,365 at March 26, 2004
   and $5,584,695 at March 28, 2003 (Note 4)                        1,130,026    1,119,513
                                                                   ----------   ----------
                                                                    1,130,026    1,119,513
                                                                   ----------   ----------

OTHER ASSETS:
  Other assets                                                         41,356       42,430
                                                                   ----------   ----------
                                                                       41,356       42,430
                                                                   ----------   ----------

Total assets                                                       $2,793,567   $3,080,150
                                                                   ==========   ==========
</TABLE>





                 See accompanying notes to financial statements

                                       34
<PAGE>














                                 IEH CORPORATION

                                 BALANCE SHEETS
                     As of March 26, 2004 and March 28, 2003


<TABLE>
<CAPTION>
                                                                                March 26,      March 28,
                                                                                  2004           2003
                                                                               -----------    -----------
                                                                                                (Note 1)
                          LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                                            <C>            <C>
CURRENT LIABILITIES:
Accounts receivable financing (Note 5)                                         $   645,096    $   712,659
Notes payable, equipment, current portion (Note 7)                                   8,936         16,978
Accrued corporate income taxes                                                      14,500         16,800
Union health & welfare, current portion (Note 12)                                   32,200         30,000
Accounts payable                                                                   738,105      1,017,432
Pension plan payable, current portion (Note 9)                                      56,000         39,000
Other current liabilities (Note 6)                                                 159,339        159,833
                                                                               -----------    -----------

          Total current liabilities                                              1,654,176      1,992,702
                                                                               -----------    -----------

LONG-TERM LIABILITIES:
Pension Plan payable, less current portion (Note 9)                                149,000        205,000
Notes payable, equipment, less current portion (Note 7)                             11,170
                                                                                                    7,822
Union health & welfare, less current portion (Note 12)                                --           13,828
                                                                               -----------    -----------
          Total long-term liabilities                                              160,170        226,650
                                                                               -----------    -----------

          Total liabilities                                                      1,814,346      2,219,352
                                                                               -----------    -----------

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized; 2,303,468 shares
   issued and outstanding at March 26, 2004 and
   March 28, 2003                                                                   23,035         23,035
Capital in excess of par value                                                   2,744,573      2,744,573
Retained earnings (Deficit)                                                     (1,788,387)    (1,906,810)
                                                                               -----------    -----------
          Total stockholders' equity                                               979,221        860,798
                                                                               -----------    -----------

          Total liabilities and stockholders' equity                           $ 2,793,567    $ 3,080,150
                                                                               ===========    ===========
</TABLE>







                 See accompanying notes to financial statements

                                       35
<PAGE>




                                 IEH CORPORATION

                             STATEMENT OF OPERATIONS


                                                             Years Ended
                                                      -------------------------
                                                       March 26,     March 28,
                                                         2004          2003
                                                      -----------   -----------

REVENUE, net sales (Note 13)                          $ 4,892,755   $ 4,727,399
                                                      -----------   -----------

COSTS AND EXPENSES:

  Cost of products sold                                 3,501,609     3,468,278
  Selling, general and administrative                     957,952       872,541
  Interest expense                                        105,661       128,654
  Depreciation and amortization                           203,650       203,670
                                                      -----------   -----------
                                                        4,768,872     4,673,143
                                                      -----------   -----------


OPERATING INCOME (LOSS)                                   123,883        54,256

OTHER INCOME                                                  387           285
                                                      -----------   -----------

INCOME (LOSS) BEFORE INCOME TAXES                         124,270        54,541

PROVISION FOR INCOME TAXES                                 (5,847)       (3,100)
                                                      -----------   -----------

NET INCOME (LOSS)                                     $   118,423   $    51,441
                                                      ===========   ===========

BASIC AND DILUTED EARNINGS PER COMMON SHARE (NOTE 1)  $       .05   $       .02

                                                      ===========   ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING (IN THOUSANDS)                                2,303         2,303
                                                      ===========   ===========







                 See accompanying notes to financial statements

                                       36
<PAGE>





                                 IEH CORPORATION

                        STATEMENT OF STOCKHOLDERS' EQUITY
              For the Years Ended March 26, 2004 and March 28, 2003



<TABLE>
<CAPTION>


                                                                  Capital in       Retained
                                                                   Excess of       Earnings
                                       Common Stock                Par Value      (Deficit)
                              -----------------------------       ----------     -----------
                                 Shares            Amount
                              ------------     ------------

<S>                             <C>            <C>              <C>              <C>
Balances, March 30, 2002        2,303,468      $    23,035      $ 2,744,573      $(1,958,251)

Net income: year ended
  March 28, 2003                                                                      51,441
                              -----------      -----------      -----------      -----------

Balances, March 28, 2003        2,303,468      $    23,035      $ 2,744,573      $(1,906,810)

Net income: year ended
  March 26, 2004                                                                     118,423
                              -----------      -----------      -----------      -----------

Balances, March 26, 2004        2,303,468      $    23,035      $ 2,744,573      $(1,788,387)
</TABLE>






                 See accompanying notes to financial statements

                                       37
<PAGE>





                                 IEH CORPORATION

                             STATEMENT OF CASH FLOWS
                           Increase (Decrease) in Cash
              For the Years Ended March 26, 2004 and March 28, 2003



<TABLE>
<CAPTION>
                                                                               Years Ended
                                                                        -------------------------
                                                                         March 26,      March 28,
                                                                            2004           2003
                                                                        ---------       ---------


<S>                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                     $ 118,423       $  51,441
                                                                        ---------       ---------

  Adjustments to reconcile net income to net cash used in
    operating activities

  Depreciation and amortization                                           203,650         203,670

Changes in assets and liabilities:
  (Increase) decrease in accounts receivable                              183,354           1,039
  (Increase) decrease inventories                                          74,477         (73,536)
  (Increase) decrease in prepaid expenses and other current assets         37,106         (14,877)
  (Increase) decrease in other assets                                       1,074           2,389

  (Decrease) increase in accounts payable                                (279,577)         66,929
  (Decrease) increase in other current liabilities                           (494)         15,403
  Increase in accrued corporate income taxes                               (2,300)         16,800
  (Decrease) in due to union health & welfare                             (11,628)        (30,000)
  (Decrease) in pension plan payable                                      (39,000)           --
                                                                        -------------------------

               Total adjustments                                          166,662         187,817
                                                                        ---------       ---------

NET CASH PROVIDED BY (USED) FOR OPERATING ACTIVITIES                      285,085         239,258
                                                                        ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Acquisition of property, plant and equipment                          (213,913)       (222,452)
                                                                        ---------       ---------

          NET CASH USED IN INVESTING ACTIVITIES                         $(213,913)      $(222,452)
                                                                        ---------       ---------
</TABLE>





                 See accompanying notes to financial statements

                                       38
<PAGE>




                                 IEH CORPORATION

                             STATEMENT OF CASH FLOWS
                           Increase (Decrease) in Cash
              For the Years Ended March 26, 2004 and March 28, 2003
<TABLE>
<CAPTION>


                                                                                    March 26,    March 28,
                                                                                       2004        2003
                                                                                    ---------    ---------

<S>                                                                                 <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable, equipment                                      $ (67,563)   $ (25,305)
Proceeds from accounts receivable financing                                            (4,694)      36,478
Principal payments on loan payable                                                       --        (25,289)
                                                                                    ---------    ---------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                   (72,257)     (14,116)
                                                                                    ---------    ---------

INCREASE (DECREASE) IN CASH                                                            (1,085)       2,690

CASH, beginning of period                                                               5,565        2,875
                                                                                    ---------    ---------

CASH, end of period                                                                 $   4,480    $   5,565
                                                                                    =========    =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, cash paid during the year for:

     Interest                                                                       $  97,309    $ 119,180
                                                                                    =========    =========

     Income Taxes                                                                   $    --      $   1,693
                                                                                    =========    =========
</TABLE>






                 See accompanying notes to financial statements

                                       39
<PAGE>


                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          Description of Business:

          The Company is engaged in the design, development, manufacture and
          distribution of high performance electronic printed circuit connectors
          and specialized interconnection devices.

          Electronic connectors and interconnection devices are used in
          providing electrical connections between electronic component
          assemblies. The Company develops and manufactures connectors, which
          are designed for a variety of high technology and high performance
          applications, and are primarily utilized by those users who require
          highly efficient and dense (the space between connection pins with the
          connector) electrical connections.

          The Company is continuously redesigning and adapting its connectors to
          meet and keep pace with developments in the electronics industry and
          has, for example, developed connectors for use with flex-circuits now
          being used in aerospace programs, computers, air-borne communications
          systems, testing systems and other areas. The Company also services
          its connectors to meet specified product requirements.

          Accounting Period:

          The Company maintains an accounting period based upon a 52-53 week
          year, which ends on the nearest Friday in business days to March 31st.
          The years ended March 26, 2004 and March 28, 2003 were comprised of 52
          weeks.

          Revenue Recognition:

          Revenues are recognized at the shipping date of the Company's
          products.

          The Company's policy with respect to customer returns and allowances
          as well as product warranty is as follows:

          The Company will accept a return of defective product within one year
          from shipment for repair or replacement at the Company's option. If
          the product is repairable, the Company at its own cost will repair and
          return to the customer. If unrepairable, the Company will either offer
          an allowance against payment or will reimburse the customer for the
          total cost of product.

          Most of the Company's products are custom ordered by customers for a
          specific use. The Company provides engineering services as part of the
          relationship with its customers in developing the custom product. The
          Company is not obligated to provide such engineering service to its
          customers. The Company does not charge separately for these services.

          Inventories:

          Inventories are stated at cost, on a first-in, first-out basis, which
          does not exceed market value.








                                       40
<PAGE>




                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

          Concentration of Credit Risk:

          The Company maintains cash balances at one bank. Amounts on deposit
          are insured by the Federal Deposit Insurance Corporation up to
          $100,000 in aggregate. There were no uninsured balances at either
          March 26, 2004 or March 28, 2003.

          Property, Plant and Equipment:

          Property, plant and equipment is stated at cost less accumulated
          depreciation and amortization. The Company provides for depreciation
          and amortization using the Modified Accelerated Cost Recovery System
          (MACRS) method over the estimated useful lives (5-7 years) of the
          related assets.

          Maintenance and repair expenditures are charged to operations, and
          renewals and betterments are capitalized. Items of property, plant and
          equipment which are sold, retired or otherwise disposed of are removed
          from the asset and accumulated depreciation or amortization account.
          Any gain or loss thereon is either credited or charged to operations.

          Income Taxes:

          The Company follows the policy of treating investment tax credits as a
          reduction in the provision for federal income tax in the year in which
          the credit arises or may be utilized. Deferred income taxes arise from
          temporary differences resulting from different depreciation methods
          used for financial and income tax purposes. The Company has adopted
          Statement of Financial Accounting Standards (SFAS) No. 109,
          "Accounting for Income Taxes".

          Net Income Per Share:

          The Company has adopted the provisions of SFAS No. 128, "Earnings Per
          Share", which requires the disclosure of "basic" and "diluted"
          earnings (loss) per share. Basic earnings per share is computed by
          dividing net income by the weighted average number of common shares
          outstanding during each period. Diluted earnings per share is similar
          to basic earnings per share except that the weighted average number of
          common shares outstanding is increased to reflect the dilutive effect
          of potential common shares, such as those issuable upon the exercise
          of stock or warrants, as if they had been issued. For the years ended
          March 26, 2004 and March 28, 2003, there were no items of potential
          dilution that would impact on the computation of diluted earnings or
          loss per share.



                                       41
<PAGE>






                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


Note 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Fair Value of Financial Instruments:

          The carrying value of the Company's financial instruments, consisting
          of accounts receivable, accounts payable, and borrowings, approximate
          their fair value due to the relatively short maturity (three months)
          of these instruments.

          Use of Estimates:

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities, revenues and expenses, and disclosure of contingent
          assets and liabilities at the date of the financial statements. Actual
          amounts could differ from those estimates.

          Impairment of Long-Lived Assets:

          SFAS No. 121, "Accounting For The Impairment of Long-Lived Assets To
          Be Disposed Of", requires that long-lived assets and certain
          identifiable intangibles to be held and used by an entity be reviewed
          for impairment whenever events or changes in circumstances indicate
          that the carrying amount of an asset may not be recoverable. The
          Company has adopted SFAS No. 121. There were no long-lived asset
          impairments recognized by the Company for the years ended March 26,
          2004 and March 28, 2003.

          Reporting Comprehensive Income:

          The Company has adopted the provisions of SFAS No. 130, "Reporting
          Comprehensive Income". This statement established standards for
          reporting and display of comprehensive income and its components
          (revenues, expenses, gains and losses) in an entity's financial
          statements. This Statement requires an entity to classify items of
          other comprehensive income by their nature in a financial statement
          and display the accumulated balance of other comprehensive income
          separately from retained earnings and additional paid-in capital in
          the equity section of a statement of financial position. There were no
          material items of comprehensive income to report for the years ended
          March 26, 2004 and March 28, 2003.

          Segment Information:

          The Company has adopted the provisions of SFAS No. 131, "Disclosures
          About Segment of An Enterprise and Related Information." This
          Statement requires public enterprises to report financial and
          descriptive information about its reportable operating segments and
          establishes standards for related disclosures about product and
          services, geographic areas, and major customers. The adoption of SFAS
          No. 131 did not affect the Company's presentation of its results of
          operations or financial position.


                                       42
<PAGE>



                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

          Effect of New Accounting Pronouncements:

          The Company does not believe that any recently issued but not yet
          effective accounting standards, have a material effect on the
          Company's financial position, results of operations or cash flows.

Note 2 -  INVENTORIES:

          Inventories are comprised of the following:

                                   March 26,           March 28,
                                      2004               2003
                                   ----------         ----------

          Raw materials            $  689,851         $  709,647
          Work in progress            196,182            281,075
          Finished goods              128,565             98,353
                                   ----------         ----------

                                   $1,014,598         $1,089,075
                                   ==========         ==========


Note 3 -  PREPAID EXPENSES AND OTHER CURRENT ASSETS:

          Prepaid expenses and other current assets are comprised of the
          following:

                                                      March 26,        March 28,
                                                        2004             2003
                                                      ----------      ----------

          Prepaid insurance                           $   11,030      $   49,816
          Prepaid corporate taxes                          5,489           3,737
          Other current assets                                97             169
                                                      ----------      ----------
                                                      $   16,616      $   53,722
                                                      ==========      ==========


Note 4 -  PROPERTY, PLANT AND EQUIPMENT:

          Property, plant and equipment are as follows:

                                                       March 26,       March 28,
                                                          2004           2003
                                                      ----------      ----------

          Computers                                   $  195,102      $  189,336
          Leasehold improvements                         585,831         585,831
          Machinery and equipment                      4,430,202       4,291,057



                                                       1,748,298       1,686,846





                                       43
<PAGE>

          Tools and dies
          Furniture and fixture                          154,808         154,808
          Website development cost                         7,550            --
                                                      ----------      ----------

                                                       7,121,791       6,907,878
          Less: accumulated depreciation and
          amortization                                 5,991,765       5,788,365
                                                      ----------      ----------

                                                      $1,130,026      $1,119,513
                                                      ==========      ==========


Note 5 -  ACCOUNTS RECEIVABLE FINANCING:

          The Company entered into an accounts receivable financing agreement
          whereby it can borrow up to eighty percent of its eligible receivables
          (as defined in the agreement) at an interest rate of 2 1/2 % above The
          Chase Manhattan Bank's publicly announced rate of 4.25% at March 26,
          2004, with a minimum of 12% per annum. The agreement has an initial
          term of one year and will automatically renew for successive one-year
          terms, unless terminated by the Company or Lender upon receiving sixty
          days prior notice. The loan is secured by the Company's accounts
          receivable and inventories. The balance due under this agreement as of
          March 26, 2004 was $645,096.

Note 6 -  OTHER CURRENT LIABILITIES:

          Other current liabilities are comprised of the following:

                                                      March 26,        March 28,
                                                        2004             2003
                                                      ----------      ----------

Payroll and vacation accruals                         $   87,964      $   77,622
Sales commissions                                          9,705          13,795
Other                                                     61,670          68,416
                                                      ----------      ----------
                                                      $  159,339      $  159,833
                                                      ==========      ==========

Note 7 -  NOTES PAYABLE EQUIPMENT:

          The Company financed the acquisition of new equipment with notes
          payable. The notes are payable over a sixty month period. The balance
          remaining at March 26, 2004 amounted to $20,106.

          Aggregate future principal payments are as follows:

            Fiscal Year Ending March:
            2005                                              $  8,936
            2006                                                 4,169
            2007                                                 3,136
            2008                                                 3,136
            2009                                                   729
                                                              --------
                                                              $ 20,106
                                                              ========

                                       44
<PAGE>




                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


Note 8 -  INCOME TAXES:

          The components of the deferred tax assets and liabilities are as
          follows:

<TABLE>
<CAPTION>
                                                                      March 26,            March 28,
                                                                        2004                  2003
                                                                     -----------          -----------
<S>                                                                  <C>                  <C>
          Deferred tax assets:

          Net operating loss carryforwards                           $ 2,165,883          $ 2,143,938
                                                                     -----------          -----------

          Gross deferred assets tax assets                             2,165,883            2,143,948

          Deferred tax liabilities:

          State income taxes                                             (84,798)             (84,727)
                                                                     -----------          -----------

          Net deferred tax assets before valuation allowance           2,081,085            2,059,221

          Valuation allowance                                         (2,081,085)          (2,059,221)
                                                                     -----------          -----------

          Net deferred tax assets                                    $         0          $         0
                                                                     ===========          ===========
</TABLE>


          At March 31, 2000, the Company established a 100% valuation allowance
          for the net deferred tax assets, as management could not determine
          that it was more likely than not that the deferred tax assets could be
          realized. The change in valuation allowance amounted to $21,864 for
          the year ended March 26, 2004.

          As of March 26, 2004, the Company has available Federal net operating
          loss carryforwards (NOL's) totaling approximately $2,165,883 which
          expire at various times through March 31, 2011, for State and Local
          purposes, the company has available NOL's approximating $2,078,389,
          which expire at various times through March 31, 2011.

          Utilization of the NOL's may be limited pursuant to Internal Revenue
          Code Section 382 should significant changes to the existing ownership
          of the Company occur.




                                       45
<PAGE>


                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 8 -  INCOME TAXES: (continued)

          A reconciliation of income taxes computed at the Federal statutory
          rate as compared to income tax expense at the effective income tax is
          as follows:


                                                         March 26,     March 23,
                                                            2004         2002
                                                         ---------     ---------

          Federal statutory income tax (benefit) rate     (34.0)%       (34.0) %

          State tax benefit, net of Federal liability     (12.2)%       (12.2) %

          Net change in valuation allowance                46.2 %        46.2  %

          Effective income tax (benefit) rate              ( - )%        ( - ) %


Note 9 -  PENSION PLAN-SALARIED PERSONNEL:

          On June 30, 1995, the Company applied to the Pension Benefit Guaranty
          Corporation ("PBGC") to have the PBGC assume all of the Company's
          responsibilities and liabilities under its Salaried Pension Plan. On
          April 26, 1996, the PBGC determined that the Salaried Pension Plan did
          not have sufficient assets available to pay benefits, which were and
          are currently due under the terms of the Plan.

          The PBGC further determined that pursuant to the provisions of the
          Employment Retirement Income Security Act of 1974, as amended
          ("ERISA"), that the Plan must be terminated in order to protect the
          interests of the Plan's participants. Accordingly, the PBGC proceeded
          pursuant to ERISA to have the Plan terminated and the PBGC appointed
          as statutory trustee, and to have July 31, 1995 established as the
          Plan's termination date.

          The Company and the PBGC negotiated a settlement on the entire matter
          and on July 2, 2001, an agreement was reached whereby the Company's
          liability to the PBGC was reduced to $244,000. The Company will make
          monthly payments to the PBGC as follows:

               September 1, 2003 to August 1, 2004        $2,000 per month
               September 1, 2004 to August 1, 2006        $3,000 per month
               September 1, 2006 to August 1, 2007        $4,000 per month


          Additionally, the Company has made balloon payments of $25,000 each on
          January 1, 2004 and May 1, 2004. The Company is also obligated to make
          additional balloon payments of $25,000 each on May 1, 2005 and January
          1, 2006.






                                       46
<PAGE>

                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 9 -  PENSION PLAN-SALARIED PERSONNEL (continued)

          The Company will also grant the PBGC a lien on the Company's machinery
          and equipment, subject to the pre-existing liens in favor of the UDC.

          As a result of this agreement the amount due the PBGC was restated to
          $244,000. $39,000 was paid during the year ended March 26, 2004. The
          balance of $205,000 is reported as follows: $56,000 as a current
          liability and $149,000 as a long-term liability.

Note 10 -  CHANGES IN STOCKHOLDERS' EQUITY:

          Retained earnings (deficit) decreased by $118,423, which represents
          the net income for the year.


Note 11-  2001 EMPLOYEE STOCK OPTION PLAN:

          On September 21, 2001 the Company's shareholders approved the adoption
          of the Company's 2002 Employees Stock Option Plan to provide for the
          grant of options to purchase up to 750,000 shares of the Company's
          common stock to all employees, including senior management.

          Options granted to employees under this plan may be designated as
          options which qualify for incentive stock option treatment under
          Section 422A of the Internal Revenue Code, or options which do not so
          qualify.

          Under this plan, the exercise price of an option designated as an
          Incentive Stock Option shall not be less than the fair market value of
          the Company's common stock on the day the option is granted. In the
          event an option designated as an incentive stock option is granted to
          a ten percent (10%) shareholder, such exercise price shall be at least
          110 Percent (110%) of the fair market value or the Company's common
          stock and the option must not be exercisable after the expiration of
          five years from the day of the grant.

          Exercise prices of non incentive stock options may be less than the
          fair market value of the Company's common stock..

          The aggregate fair market value of shares subject to options granted
          to a participant(s), which are designated as incentive stock options,
          and which become exercisable in any calendar year, shall not exceed
          $100,000. As of March 26, 2004 no options had been granted under the
          plan.



                                       47
<PAGE>


                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 12 - COMMITMENTS:

          The Company exercised its option to renew its lease on the premises
          for 10 years. The original lease ran through August 23, 2001.

          The Company is obligated under this renewal through August 23, 2011,
          at minimum annual rentals as follows:

          Fiscal year ending March:

          2004
          2005                    $112,765
          2006                     112,765
          2007                     112,765
          2008                     112,765
          2009                     112,765
          2010                     112,765
          2011                      75,177
                                  --------

                                  $751,767
                                  ========

          The rental expense for the year ended March 26, 2004 for this lease
          was $112,765.

          The terms of the renewal are presently being negotiated by the Company
          and its landlord, Apple Industrial Development, Corp.

          The Company has a collective bargaining multi-employer pension plan
          with the United Auto Workers of America, Local 259. Contributions are
          made in accordance with a negotiated labor contract and are based on
          the number of covered employees employed per month. With the passage
          of the Multi-Employer Pension Plan Amendments Act of 1990 ("The Act"),
          the Company may become subject to liabilities in excess of
          contributions made under the collective bargaining agreement.
          Generally, these liabilities are contingent upon the termination,
          withdrawal, or partial withdrawal from the Plan.

          The Company has not taken any action to terminate, withdraw or
          partially withdraw from the Plan nor does it intend to do so in the
          future. Under the Act, liabilities would be based upon the Company's
          proportional share of the Plan's unfunded vested benefits, which is
          currently not available. The amount of accumulated benefits and net
          assets of such Plan also is not currently available to the Company.
          The total contributions charged to operations under this pension plan
          were $47,519 for the year ended March 26, 2004 and $43,019 for the
          year ended March 28, 2003.

          As of March 26, 2004, the Company reported arrears with respect to its
          contributions to the Union's health and welfare plan. The amount due
          the health and welfare plan was $32,200.








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<PAGE>

                                 IEH CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

Note 12 - COMMITMENTS:  (continued)


          The total amount due of $32,200 is reported on the accompanying
          balance sheet as a current liability.

          In December 1993, the Company and Local 259 entered into a verbal
          agreement whereby the Company would satisfy this debt by the following
          payment schedule:

          The sum of $2,500 will be paid by the Company each month in
          satisfaction of the current arrears until this total debt has been
          paid. Under this agreement, the projected payment schedule for arrears
          will satisfy the total debt in 13 months.

Note 13 - REVENUES FROM MAJOR CUSTOMERS:

          In the fiscal year ended March 26, 2004, approximately 21% of the
          Company's total revenues were earned from one customer. Total sales to
          this customer were approximately $1,027,000. No other customer
          accounted for over 10% of the Company's sales. Accounts receivable as
          of March 26, 2004, included a receivable from one customer, which
          amounted to 10% of the total accounts receivable, no other customer
          had receivables over 10%.








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